A few days after the general election, I bumped into one of David Cameron’s longest-standing political allies, one of those who had helped him get selected for Witney back in 2000. I remarked that he must be delighted that Cameron had now won a majority. To my surprise, he glumly replied that it would only be significant if Cameron were to create a hundred new peers. Without them, he warned, the govern-ment’s most important measures would end up bogged down in the Lords, where Labour and the Liberal Democrats combined comfortably outnumber the Tories.
Now, normally when people urge the Prime Minister to create new peers it is because they hope that they will be on the list themselves. But this source was one of those rare Westminster beasts with no interest in a peerage and his fear is now being borne out. Since May, the government has lost more than 70 per cent of votes in the Lords. Just this week, the upper house has rejected plans for tax-credit reform even though it normally defers to the elected house where tax is concerned. A week earlier, the Lords decided that they understood what was in the Tory manifesto better than the Tories and defeated the government over subsidies to onshore windfarms. This happened in spite of the Salisbury Convention, which says that the Lords shouldn’t block manifesto commitments.
What is striking about the Lords’ behaviour is the eagerness with which they are picking fights with the government and the elected house. There is little the Tories can do to stop losing votes there. For Monday’s vote they turned out more of their peers than they have for a decade, and still lost. The frequency of these defeats is causing increasing irritation in Downing Street. One senior No. 10 figures fumes that Labour and the Liberal Democrats are ‘treating the revising chamber as a legislative chamber’.
Traditionally, peers have been wary of full-blown confrontation with the government because they know that their legitimacy is questionable and they have no desire to spark a debate about whether or not the Lords should be abolished. But this has changed since May. The Liberal Democrat peers, of whom there are more than a hundred, don’t much care if they bring the whole place down. They regard the Lords as an absurd anachronism and are therefore happy to heighten the contradictions of having an unelected chamber in a 21st century parliament. These Lib Dem peers have been radicalised by the general election result. They feel that their party was taken for a ride by the Tories, who lured them into government and then destroyed them, and are determined to have their vengeance by whatever means possible.
Their behaviour is having a knock-on effect on Labour, who don’t want to be outflanked as the left-wing opposition to the Tories. There is also the Corbyn factor. When Jeremy Corbyn was elected Labour leader, the Tories hoped this would reduce their problem in the Lords. They believed that Labour peers appointed by Tony Blair and Gordon Brown would have little time for a leader from the hard left who had been such a thorn in New Labour’s side. But Labour peers have reacted rather differently to their new leader. The party’s travails in the Commons have made many of them feel that it is now their job to oppose the government. And there is no doubt that the Lords have been emboldened on tax credits by the sense that public opinion is on their side.
The issue of peer pressure is not going to go away. There’s little confidence in Tory circles that the government’s record on winning votes will improve. One of those involved in working out how to get legislation through the upper house says, despairingly: ‘I now assume we are going to lose every big vote down there.’ Short of flooding the place with new peers, it is hard to see what the short-term solution is. (I understand that the option of appointing a few dozen more peers has not been taken off the table, though Cameron is averse to such a move by temperament.) Indeed, inside government there is concern that if they talk too tough on Lords reform, they might have to do something dramatic and that could lead to a full-blown confrontation with the upper house, leading to legislative gridlock. The current government review into the Lords is as much about providing covering fire while Osborne works on a solution to his tax credit problem as it is about addressing any constitutional question.
In the medium term, part of the answer to getting the Lords to respect the will of the Commons must be more frankness from parties about what they intend to do if they gain office. If the Tories had a clearer mandate for what they are doing to tax credits, more peers would have had reservations about blocking the government’s agenda.
Meanwhile, Osborne has to prepare for next month’s autumn statement. His allies say that he will find some ways of softening the impact of the cuts but that he won’t draw back from the reform. The view in Downing Street is that there is ‘something structurally wrong with our economy’ which leads to welfare being so high and wages so low and that changing tax credits is the key to fixing that imbalance. It is certain is that Osborne’s tweaks to the tax credits package won’t be the ones peers voted for; the government is determined not to let the Lords dictate the terms of their surrender.
His supporters believe that, with a few changes, these tax credit reforms can pass and will come to be accepted by the electorate. They point out the way he tweaked the benefits cap with the introduction of a discretionary fund for local authorities, and the removal of child benefit from higher-rate taxpayers by means of a taper, and that both measures now enjoy widespread support.
The bigger challenge for the government, however, is to turn the national conversation back on to the importance of dealing with the deficit. The public will accept tough measures such as tax-credit reform only if they believe that balancing the books is imperative and that there is no alternative.